Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 20th Nov 12, 9:52 AM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: Payday lenders face OFT crackdown over debt collection
    • #1
    • 20th Nov 12, 9:52 AM
    MSE News: Payday lenders face OFT crackdown over debt collection 20th Nov 12 at 9:52 AM
    "The watchdog has opened investigations into several payday lenders over aggressive debt collection practices..."

Page 1
    • fermi
    • By fermi 20th Nov 12, 10:58 AM
    • 39,669 Posts
    • 47,650 Thanks
    fermi
    • #2
    • 20th Nov 12, 10:58 AM
    • #2
    • 20th Nov 12, 10:58 AM
    The official OFT press release.

    http://oft.gov.uk/news-and-updates/press/2012/110-12

    The OFT has opened formal investigations into several payday lenders over aggressive debt collection practices. It is also today writing to all 240 payday lenders highlighting its emerging concerns over poor practices in the sector.

    These actions are set out in a progress report published today as part of the OFT's compliance review of the payday lending sector. It highlights concerns about:
    • the adequacy of checks made by some lenders on whether loans will be affordable for borrowers
    • the proportion of loans that are not repaid on time
    • the frequency with which some lenders roll over or refinance loans
    • the lack of forbearance shown by some lenders when borrowers get into financial difficulty
    • debt collection practices.
    The OFT is continuing to gather and analyse information about the activities of payday lenders as its compliance review progresses. It also expects to warn the majority of the 50 firms inspected, which account for the majority of loans, that they risk enforcement action if they do not improve specific practices and procedures which came to light when they were inspected. The OFT will require those lenders it warns to provide it with independent audits to verify that they have improved their practices and procedures to comply with legal obligations and expected standards.

    The emerging findings are based on information from a wide range of sources, including:
    • a 'sweep' of the websites of 50 payday lenders
    • a programme of inspections of over 50 individual lenders
    • 686 consumer complaints
    • a mystery shopper exercise involving 156 online and high street lenders
    • 1,036 responses to a survey of businesses, trade associations and consumer bodies.
    The OFT will publish a full report in the New Year setting out further findings on compliance, including whether wider action is needed to tackle problems in the sector.

    The OFT has also today published revised Debt Collection Guidance, focusing on continuous payment authority (CPA), a mechanism commonly used by payday lenders to collect repayments.

    The guidance helps to ensure that traders with a consumer credit licence do not misuse CPA. It makes clear that the OFT expects lenders' use of CPA to be reasonable and proportionate, and to have regard to a borrower's financial position.

    The guidance sets out the minimum standards expected of traders and includes clear examples of unfair/improper use of CPA including:
    • using CPA without the informed consent of the borrower or in ways that have not been agreed
    • failing to explain adequately how CPA works and how it can be cancelled
    • not taking steps to establish the reasons for the payment failure and whether the borrower may be in financial difficulties
    • trying to take payment where there is reason to believe that there are insufficient funds in the account
    • continuing to use CPA for an unreasonable period after a scheduled payment was due.
    Breaching OFT guidance can lead to enforcement action.
    David Fisher, OFT Director of Consumer Credit, said:

    'We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them. It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action.

    'Our report shows that a large number of payday loans are not repaid on time. I would urge anyone thinking about taking out a payday loan to make sure they fully understand the costs involved so they can be sure they can afford to repay it.

    'Our revised guidance makes it absolutely clear to lenders what we expect from them when using continuous payment authority to recover debts and that we will not accept its misuse.'

    NOTES
    1. See the payday lending progress report.
    2. The Consumer Credit Act 1974 requires most businesses offering credit, lending money or involved in activities relating to credit or hire, such as debt collectors, to be licensed by the OFT. The OFT produces guidance to clarify its expectations of those companies and individuals that hold a consumer credit licence. Failure to have regard to OFT guidance can call into consideration the business' fitness to hold a consumer credit licence.
    3. The OFT is not able to name the companies it is investigating because of disclosure restrictions under Part 9 of the Enterprise Act 2002. Where the OFT uses its formal powers under the Consumer Credit Act 1974 to refuse or revoke a credit licence, decisions are made public on the Consumer Credit Public Register.
    4. The OFT launched its review into the payday lending sector in February 2012.
    5. The OFT has issued specific guidance for all businesses engaged in the recovery of consumer credit related debts. The Debt Collection Guidance sets out the standards expected of all business engaging in the activity including creditors, law firms and tracing agents as well as traditional debt collectors. See the OFT's revised Debt Collection Guidance.
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
    • fermi
    • By fermi 20th Nov 12, 10:58 AM
    • 39,669 Posts
    • 47,650 Thanks
    fermi
    • #3
    • 20th Nov 12, 10:58 AM
    • #3
    • 20th Nov 12, 10:58 AM
    The section added to the OFT debt collection guidance.

    Deceptive and/or unfair methods

    3.8 Dealings with debtors and others are not to be deceitful and/or unfair.

    3.9 Examples of unfair or improper practices are as follows:

    .....

    .....


    m. misusing a continuous payment authority (CPA) 48 including by 49



    (i) using the CPA other than as set out in the credit agreement or without the informed consent of the debtor or a relevant third party 50

    For example:

    • debiting a higher amount than agreed, or adding default fees or other sums unless specifically agreed
    • debiting a lesser amount than agreed, unless it was specifically agreed that this could be done if the full amount was not available (or under a repayment plan)
    • debiting an account before the due date for repayment (as specified in or under the credit agreement)
    • debiting the account after the due date on a date, or within a period, or with a frequency, other than as specifically agreed
    • debiting the account of a third party other than as specifically agreed with the third party or with the debtor acting with the consent of the third party. 51

    By ‘specifically agreed’, we mean that the relevant account (and card details), the amount (or the basis on which part payments or default fees or other sums may be taken), the due date 52 (and an alternative payment date where applicable), the period within which attempts may be made and the frequency of such attempts must be specified in the credit agreement and included in a pre-contractual explanation (see below). 53
    48 A continuous payment authority authorises the creditor to withdraw sums from the debtor’s account, subject to agreed terms, but not through a direct debit, standing order or similar payment mechanism.

    49 In line with section 25(2A)(b)(iii) of the Act, in determining fitness the OFT will also of course have regard to whether the contractual terms or practices used in relation to a CPA contravene any enactment regarding transactions with individuals.

    50 Signature of the credit agreement is not sufficient to evidence informed consent by the debtor. The debtor must also be given an adequate pre-contractual explanation.

    51 This refers to the situation where a third party has agreed to make repayment of a loan that is subject to a CPA. The creditor should be satisfied, before using the CPA, that the third party has authorised use of their account. This may involve requiring the debtor to confirm that they have authority to use the particular third party account.

    52 We would expect the agreement to stipulate a specific due date for repayment (or the basis on which this will be determined in the case of running-account credit). In the case of instalment loans, each due date for repayment should be specified.

    53 See also point (iii) below regarding subsequent variations to the agreement.
    (ii) using the CPA in a manner which is unreasonable or disproportionate or excessive in failing to have proper regard to the possibility that a debtor is in financial difficulties and the consequent need for forbearance

    For example:

    • seeking payment before income or other funds may reasonably be expected to reach the account
    • seeking payment where there is reason to believe that there are insufficient funds in the account or that this would leave insufficient funds for priority debts or other essential living expenses 54
    • continuing to use the CPA after the debtor has informed the creditor, or the latter has otherwise become aware, that the debtor is in financial difficulties and cannot afford to repay
    • continuing to use the CPA for an unreasonable period after the due date without taking steps to establish the reason(s) for the payment failure
    • seeking part payment before reasonable attempts to collect in full on the due date have been made.
    54 For example, mortgage, rent, council tax, utility charges, food bills.
    Whether use of a CPA is reasonable and proportionate, and not excessive (as regards the frequency or period of collection attempts), will depend upon the circumstances, including whether there may be evidence of actual or potential financial difficulty and whether the debtor has been notified of the failure to collect and has responded to contact from the creditor.

    The OFT would expect creditors to exercise appropriate forbearance where there is evidence to suggest that the debtor is, or may be, experiencing financial difficulties.

    If the creditor is unable to recover the whole of the due amount 55 by the end of the next business day after the due date, the OFT would generally regard this as indicating the possibility of financial difficulty. We would generally therefore expect the creditor to suspend use of the CPA until reasonable efforts to contact the debtor to establish the reason(s) for the payment failure and whether the debtor may be in financial difficulties have been made (unless this has already been done subsequent to the initial payment failure).

    If the parties have agreed an alternative payment date, as a fallback if the full payment is not available on the due date, we would generally expect the creditor to suspend use of the CPA after the due date, and again after the alternative payment date (if the creditor is unable to recover the due amount by the end of that day), and make reasonable efforts to contact the debtor as above.

    If there is evidence of financial difficulty, we would expect the creditor to reassess the position with a view to agreeing a revised payment schedule or alternative repayment arrangements where appropriate.

    If reasonable efforts to contact the debtor are unsuccessful or the debtor refuses to engage (and there is no further evidence of financial difficulty), any subsequent use of the CPA should be reasonable and not excessive with due regard to the possibility that an unresponsive debtor may nevertheless be in financial difficulties and that a debtor not in financial difficulties at the time of contact may subsequently be in financial difficulties.

    If attempts to recover payment continue to fail, we would expect the creditor to make periodic further reasonable attempts at contact, at reasonable intervals, to establish whether the debtor may be in financial difficulties. What is ‘reasonable’ will depend upon all the circumstances including information the creditor has on the debtor’s position, the result of previous contact attempts and the period over which payment attempts have been unsuccessful.

    Part payments should be sought only following reasonable efforts to collect in full on the due date and having regard to the possibility that the debtor is in financial difficulties. Attempts at part payment, where used and whether successful or not, should be reasonable in number bearing in mind the possibility of such difficulties. For example, if part payment is taken to avoid a debtor incurring a default charge, we would generally expect that only one such payment would be required for this.
    55 Whether by full payment or (subject to what is said below) part payments.
    (iii) failing to document the CPA appropriately or to explain it adequately before entering into the credit agreement

    For example:

    • failing to include the relevant terms as part of the credit agreement, as presented to the debtor
    • failing to set out clearly, and in plain intelligible language, the scope of the agreed authority and how it will operate
    • using terms which are unclear or unfair or misleading, whether by inclusion or omission 56
    • seeking to amend the terms subsequently without the debtor’s prior informed consent to the amendments or other than pursuant to a variation clause to which the debtor has previously given informed consent. 57

    In addition, the creditor should use the correct category code and identifier when presenting a payment request to the relevant payment service provider.

    We would expect the pre-contractual explanation under section 55A of the Act to at least include:

    • what a CPA is and how it works
    • how it will be applied by the creditor
    • how it can be cancelled by the debtor
    • whether alternative repayment options are available
    • the choice of an appropriate due date for repayment
    • the choice of an alternative payment date (if applicable)
    • the consequences if sufficient funds are not available on the due date (or an alternative payment date if agreed)
    • whether further attempts may be made to collect payment and, if so, on what basis, on what day(s) or over what period and with what frequency
    • whether part payments may be sought and, if so, on what basis and with what frequency and whether this will be subject to a minimum amount or percentage
    • whether default fees or other charges may be added and, if so, in what circumstances these may be incurred and the amount(s) of such fees/charges or the basis on which these will be calculated.
    56 As noted above, in determining fitness the OFT will have regard to relevant legislation including whether terms used are unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 and whether practices may contravene the Consumer Protection from Unfair Trading Regulations 2008.

    57 This does not preclude the creditor from reducing or waiving payments unilaterally, for example under a repayment plan, provided that this is explained to the debtor. Any modifying agreement or unilateral variation should be documented appropriately and explained adequately to the debtor.
    (iv) seeking improperly or unfairly to inhibit or discourage the debtor from cancelling the CPA

    For example:

    • misleading the debtor (by inclusion or omission) regarding the right to cancel and how this may be exercised 58
    • putting obstacles in the way of cancellation by the debtor
    • failing to respond promptly to requests by or on behalf of the debtor to amend or cancel the CPA
    • failing to cease use of the CPA upon being notified that the CPA has been cancelled with the payment service provider
    • seeking to intimidate a debtor who wishes to cancel.
    58 Under the Payment Services Regulations, the debtor can cancel a CPA at any time up to close of business on the day prior to collection, and can do so either with the creditor or with the payment service provider. If monies are taken without informed consent, or otherwise in breach of the agreed authority, the transaction will be unauthorised and the payment service provider must refund the payment and any ancillary charges.
    Last edited by fermi; 21-11-2012 at 8:17 AM.
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
    • Consumerist
    • By Consumerist 20th Nov 12, 11:09 AM
    • 5,203 Posts
    • 2,604 Thanks
    Consumerist
    • #4
    • 20th Nov 12, 11:09 AM
    • #4
    • 20th Nov 12, 11:09 AM
    The pay-day loan companies must be really quaking in their boots now the OFT has woken up.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • antrobus
    • By antrobus 20th Nov 12, 11:28 AM
    • 16,668 Posts
    • 23,601 Thanks
    antrobus
    • #5
    • 20th Nov 12, 11:28 AM
    • #5
    • 20th Nov 12, 11:28 AM
    The pay-day loan companies must be really quaking in their boots now the OFT has woken up.
    Originally posted by Consumerist
    I imagine they are, as it turns out. If the OFT decides to revoke their CCA licence, which it can, then bang goes their business.
    • Consumerist
    • By Consumerist 20th Nov 12, 11:41 AM
    • 5,203 Posts
    • 2,604 Thanks
    Consumerist
    • #6
    • 20th Nov 12, 11:41 AM
    • #6
    • 20th Nov 12, 11:41 AM
    I imagine they are, as it turns out. If the OFT decides to revoke their CCA licence, which it can, then bang goes their business.
    Originally posted by antrobus
    Unfortunately, what the OFT can do and what they will do (or when) are entirely different things. I reserve judgement.
    Warning: In the kingdom of the blind, the one-eyed man is king.
  • JustinCredibleGillespie
    • #7
    • 20th Nov 12, 11:50 AM
    • #7
    • 20th Nov 12, 11:50 AM
    Lets hope they name & shame the worst of them! Not that we already have a fair idea of who they are due to the newbies & experiences left on this site.

    JCG

    xx
    • Consumerist
    • By Consumerist 20th Nov 12, 12:12 PM
    • 5,203 Posts
    • 2,604 Thanks
    Consumerist
    • #8
    • 20th Nov 12, 12:12 PM
    • #8
    • 20th Nov 12, 12:12 PM
    Lets hope they name & shame the worst of them! Not that we already have a fair idea of who they are due to the newbies & experiences left on this site.
    Originally posted by JustinCredibleGillespie
    If the OFT do their job properly, there will be no need to name and shame them because they will be out of business.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • antrobus
    • By antrobus 20th Nov 12, 12:36 PM
    • 16,668 Posts
    • 23,601 Thanks
    antrobus
    • #9
    • 20th Nov 12, 12:36 PM
    • #9
    • 20th Nov 12, 12:36 PM
    Unfortunately, what the OFT can do and what they will do (or when) are entirely different things. I reserve judgement.
    Originally posted by Consumerist
    Your original comment suggests otherwise, and clearly implies that you have already made your mind up as to what you believe the OFT will do.

    Personally, I haven't the faintest idea. No doubt it will depend on what the OFT investigation comes up with, and whether or not the lenders in question 'improve their business practices' or not.
  • Tight as a Drum
    240!!!

    REALLY?
    If you're going through hell, keep going - Winston Churchill
    • Consumerist
    • By Consumerist 20th Nov 12, 1:31 PM
    • 5,203 Posts
    • 2,604 Thanks
    Consumerist
    Your original comment suggests otherwise, and clearly implies that you have already made your mind up as to what you believe the OFT will do.
    Originally posted by antrobus
    My original comment may suggest otherwise to you but, as I have said, I reserve judgement whether you like or not.

    That said, it would be true to suggest, or even infer, that I have little faith in the OFT.
    Last edited by Consumerist; 20-11-2012 at 1:44 PM.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • fozmcfc
    • By fozmcfc 20th Nov 12, 5:00 PM
    • 3,028 Posts
    • 2,197 Thanks
    fozmcfc
    Simple measures can see a lot of this cut out.

    1/ Only one payday loan allowed at any one time.

    2/ Only one roll over allowed.

    3/ If not paid back in full, within 7 days of due date, then default on customer, unless arrangement to pay agreed.

    4/ A complete block for any further credit, after default issued. After it is paid back, block for at least 12 months on any further credit.

    Yes perhaps some of the ways customers are harassed afterwards may be unethical and something should be done about the excess charges, which sometimes stops people paying it back within a short period.

    But then so many people take these out without, thinking are they going to be able to pay it back, or they know for certain they will not be able to pay it back. Or of course take another one to pay off the original one.
    • Ronaldo Mconaldo
    • By Ronaldo Mconaldo 20th Nov 12, 6:40 PM
    • 4,984 Posts
    • 5,240 Thanks
    Ronaldo Mconaldo
    What I find most ironic is that "Pay Day" loan companies seem to target those people without jobs so who will not even have a pay day anyway.
    • Enfieldian
    • By Enfieldian 20th Nov 12, 8:15 PM
    • 2,704 Posts
    • 2,755 Thanks
    Enfieldian
    What I find most ironic is that "Pay Day" loan companies seem to target those people without jobs so who will not even have a pay day anyway.
    Originally posted by Ronaldo Mconaldo
    True, but judging by some of the posts on here it is often those without jobs that target these types of lender!
    • mo786uk
    • By mo786uk 20th Nov 12, 10:47 PM
    • 1,358 Posts
    • 573 Thanks
    mo786uk
    The problem the OFT has is that the burden on them to take away a licence in extremley hard and even if they do opt to take a licence away the PDL company can appeal.

    The Govt might say it wants companies to comply with the law but can you imagine if a major PDL company was closed down and everyone lost their jobs? The Govt might not be so glad then!
    • easilyparted
    • By easilyparted 21st Nov 12, 12:16 PM
    • 38 Posts
    • 9 Thanks
    easilyparted
    I have shares in Provident Financial. Is this company a 'payday lender'?
    • mo786uk
    • By mo786uk 21st Nov 12, 9:54 PM
    • 1,358 Posts
    • 573 Thanks
    mo786uk
    I have shares in Provident Financial. Is this company a 'payday lender'?
    Originally posted by easilyparted
    they are a doorstep lender - similar type of lending

    featured on panorama a few weeks ago for doing similar things - like getting old aldies to take out loans they couldnt afford.
  • im-lost
    What I find most ironic is that "Pay Day" loan companies seem to target those people without jobs so who will not even have a pay day anyway.
    Originally posted by Ronaldo Mconaldo
    I think you will find that a good proportion of the lenders require employment details..

    So it is in fact the 'customer' lying on their applications
  • worried48
    All the ones I have seen insist that you are in work. Now it is of course easy to say you are when you aren't, as they don't ask for proof, but they do say that is a condition and most of the ones I have seen won't even accept the self-employed.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,589Posts Today

5,168Users online

Martin's Twitter
  • Mini MSE is on half term next week, so I'm excited to be taking the week off to be daddy. As normal I'm signing of? https://t.co/G3366shWh1

  • I once blurted out on @gmb "Theresa May hasn't been given a poisoned chalice - she's been given a poisoned chalice? https://t.co/onfRbY3XVg

  • It'd be fascinating to know how history will judge Theresa May's premiership. Currently, it is hard to see it as a? https://t.co/eH77G0O9LA

  • Follow Martin